Hidden Vigorish

Detailed Analysis of The Pittsburgh Pirates

Why I Care About The Pirates Payroll….And You Should Too

The Pirates have started taking some criticism from their fans and the media for a lack of spending on the payroll of the MLB roster this winter. This has also led to a number of defenders of the front office to voice their opinion in support of the Pirates’ spending. Some have not just defended the front office, but they’ve also taken an apathetic stance. Tim Williams of PiratesProspects.com says he doesn’t care about the payroll. I find that odd considering he often discusses the payroll advantages that high revenue teams have and how that aids them in building championship contenders. I agree with Tim that high revenue teams create an imbalanced economic structure that puts low revenue teams like the Pirates at a clear disadvantage. But I also believe if you care about the overall economics of the sport you should also care about how the team is operating within the economic climate of the industry. That means caring that the Pirates are using their available resources as best they can comparatively to the rest of the sport. That means also caring about payroll.
For years owner Bob Nutting and the rest of the front office has told the fans that the Pirates would make a greater financial commitment to the team payroll when it made sense to do so. We were told when the team was a contender payroll would rise significantly if the fans were supporting the team. The fans have held up their end of the bargain. Last year was the second highest attendance in Pirates history. The team has already stated that they expect a new attendance record will be set in 2014. Ownership on the other hand has not held up their end of the bargain.
It is true that the team payroll has risen in recent years, but that is very misleading. The Pirates’ financial documents from the 2007 and 2008 seasons that were leaked by Deaspin showed that as a percentage of revenue, the payroll of the Pirates’ major league roster was 36.7% in 2007 and 34.9% in 2008. As a point of comparison MLB Chief Operating Officer Rob Manfred stated that players received about 52% of league wide revenue during the 2008 season. The Pirates were spending much less of their piece of the revenue pie on payroll than other teams. If Nutting was true to his word the percentage of team revenues used on payroll should be rising. It is not.

According to estimates by Bloomberg the Pirates had revenues of $185 million in 2013. Most insiders consider the Bloomberg estimates to be quite accurate. Many MLB teams have confirmed the estimates to Bloomberg. The $185 million estimate for the Pirates does not include the playoff windfall from 2013, as those had not yet been tallied. We have a pretty good idea that the Pirates generated an extra $5 million to $10 million in revenue from their playoff run. That lines up with other documents Deadspin leaked of the Rays and Angels during years they qualified for the playoffs. We also know the Pirates are getting an extra $20 million this year due to new National TV contracts that are going into effect this season. It is a fair estimation that the Pirates are working with revenues of around $215 million. The Pirates opening day payroll as it stands right now is estimated at $73 million. That works out to just 33.9% of the estimated revenues. That isn’t higher than 2007 and 2008. I’m not seeing any great financial commitment, are you? People often say they want the Pirates to be like the Rays. In 2010 The Rays stretched payroll to more than 47% of revenues. Do you think the Pirates would ever do that?
Why should I care about this? Well, because I love the Pittsburgh Pirates. I know their resources are much more limited compared to other teams, but I want them to use the resources they have the best they can. In my opinion sitting on $10 million dollars is just as bad as wasting $10 million on a bad signing. There is no indication money saved from the budget today will go towards the roster down the road. This is a good team. They are a contender now. Even marginal improvements could make a big difference. 1 or 2 extra wins could be the difference between just barely missing the playoffs or making the playoffs. It would be a big mistake for the Pirates to fail to upgrade a position over a difference of just a few million dollars when the money appears to be there.

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